Posts Tagged ‘foreclosure crisis’

Foreclosures Are Dragging Down The Economy

Typically, construction jobs and more specifically, new home construction jobs spur economic growth and herald the end of recessions past. This is not happening today, and for very good reason. A recent Huffington Post article cited that thirty percent of home sales were of foreclosed properties. To put it another way, close to a third of all home sales taking place today involve foreclosures. That’s huge, and until foreclosures stop driving the housing market and until the huge inventory of available homes is reduced, home values will continue to decline and developers will not be inclined to build new housing developments.

The foreclosure crisis is a national emergency and clearly, none of the government programs designed to help families in foreclosure are helping enough people to make a difference. The problem is that all of the programs currently available remain voluntary on the part of the banks and are designed to ensure that the banks continue to profit, even if the underlying loan is so poorly underwritten and so poorly constructed as to be ultimately designed to fail.

Priority number one has got to be to stabilize the housing market, and that means stopping foreclosures. I don’t just mean delaying them, because all that does is kick the can down the road, I mean actually doing something that will stop them and keep families in their homes. To do that, the banks are going to have to lump it and a mass loan modification program needs to be implemented.

This will definitely mean that some banks are going to go under. Some banks are so seriously over-leveraged that it is only through governmental efforts to aid them in concealing the true state of their balance sheets that they remain open and profitable. Yes, profitable. The worst banks (Bank of America, Wells Fargo, Chase) remain open and profitable while drowning in a sea of foreclosures. How is that? Because current efforts to staunch the foreclosure crisis have resulted in massive delays that have allowed the banks to essentially ignore “mark to market” rules and over-report their assets and diminish their liabilities. Let’s face it, a thousand homes for which the value has dropped by hundreds of thousands of dollars are not assets. No, they are  huge liabilities, and the banks get to hide this fact. Banks like this deserve to go under.

Now, we’ve heard the arguments against mass modifications: it will create a moral hazard; it will keep people in homes they shouldn’t have been able to buy anyway, it will reward deadbeats, etc. The time for recriminations and blame has passed. The foreclosure crisis is crippling the economy and is in large part the reason why unemployment remains so high and why growth is stagnating.  So what, if a few people get to keep homes that they shouldn’t have been able to buy. Let’s weigh that against the certainty that the United States is falling into a depression the likes of which has not been seen since the 1930’s.

Elizabeth Warren Stops Obama From Signing Foreclosure Friendly Bill

 

You might be wondering why would our government would try to loosen the documentation standards to make it easier for banks to foreclose on homeowners in the the midst of the worst foreclosure crisis in the history of the United States. Yeah, I am wondering about that, too.

See, both houses of congress passed a bill that would have made it easier for banks to foreclose across state lines by easing notarization standards. President Obama was going to sign the bill, too. Another win for the banks who are awash in profits while millions of homeowners flounder under the weight of the sagging economy and the bad loans that Wall Street pushed on them.

Elizabeth Warren who has been given broad authority in shaping the new watchdog agency within the Fed dedicated to making sure that all financial products are safe for the American consumer, and who reports directly to President Obama, persuaded him to veto the bill, and so he did.

Wall Street and the financial industry do not like Ms. Warren. She pulls no punches and tells it like it is. She also understands the plight of the middle class and how hard it is for American families to make it these days and she is the champion of average every day Americans long missing from Obama’s Administration.

Thank You, Captain Obvious!

Ok, so I haven’t been updating here much lately, but I am back, and I came across this post at Crooks and Liars today about the testimony at yet ANOTHER foreclosure crisis hearing in the House. Yet another financial expert is telling our Congressmen that the Treasury is all about protecting the banks and not the American people.

Umm..let’s see. The foreclosure crisis started in late 2007 and rapidly picked up steam when it finally took a tumble off a cliff in the fall of 2008. There have been  plenty of congressional and senatorial hearings during this time, with our representatives and senators wringing their hands about what can be done to fix the mess. Since then, millions of families have been foreclosed on, most of them, I might add, wrongfully, given the fact that we now know the extent of the mortgage fraud on the parts of servicers, Wall Street, and the brokers that sold these crappy, crappy loans to the American people.

Since then, what do we have to show for it? Bush tried Hope For Homeowners, and that didn’t work because no one who was in trouble could qualify. Then Obama comes along and he tries HAMP. Although HAMP has done better than Hope for Homeowners, it must still be classified as a complete failure because it is at best a band aid over the gaping wound that is the U.S. housing market. Millions of families have lost their homes since the advent of the crisis and millions more will lose their homes before its over.

So, why has nothing changed? Why can’t the government keep our great nation from bleeding out? As Adam Levitin put it “The federal regulators don’t want to get info from the servicers, because then they’d have to do something about it.” and “The prime directive coming out of the Treasury is ‘protect the banks and don’t force them to recognize their losses.”

As I have said many times, the only way to fix the foreclosure mess, which by the way, is one of the major impediments to a full and thriving economic recovery, is to tell the banks they’ve got to take their lumps, and modify every single distressed loan in the nation. Sure, this will cause  some banks will fail, but other, more stable banks will rise up to take their place. That’s capitalism. The bankers were the ones to take enormous risks with our money and the financial stability of the entire nation and they should be made to pay for their folly. The American people have already paid in blood, sweat and tears for what was largely not their fault.

Speaker Pelosi and 30 California Democrats: “Banks Need To Be Held Accountable.”

Today, Speaker Pelosi and 30 California Democrats told the justice department that “it is time that the banks were held accountable for their practices.” Really? You guys are just figuring this out? Wow, Congress is sure slow on the uptake…or maybe it’s all that Goldman Sucks money flowing into the pockets of elected officials that’s clogging up their brains.

Let’s see: over the past two years, we have seen the foreclosure rate continue to rise and hundreds of thousands of Americans have been kicked out of their homes in spite of programs designed to help them. Going through the HAMP process is a nightmare in and of itself, aside from the trauma of foreclosure itself, because the banks just don’t want to cooperate. They won’t even cooperate on short sales most of the time! Recently, we’ve had the Ally Bank signature debacle and another company, Lender Processing Services (LPS) has been in the news lately because apparently they’ve been having their employees sign authorized employees’ signatures to foreclosure documents.

(more…)

Paperwork Issues Have Halted Foreclosures In Only 23 States

You may have heard about the Ally Bank employee who admitted that he signed off on foreclosures without actually verifying who owns the mortgage and the amounts owed. As a result, thousands of foreclosures have been stalled until the mess can get sorted out.

There were similar happenings at Wells Fargo and JP Morgan Chase which have resulted in the mortgage giants having to stop the foreclosure process until the documents can be sorted out. Furthermore,  recent news about so-called “foreclosure mill law-firms” who regularly submit false documents on behalf of the banks to “speed up the process” has also come to light.

It is clear that the fraud that precipitated the foreclosure crisis is now rife within the foreclosure process itself. There has been little accountability pressed on the banks and so far, they’ve gotten away with hundreds of thousands of foreclosures, of which a significant percentage may have been completed fraudulently.

To their credit, many state governments have acted quickly to enact laws that demand the lender make sure it has the right to foreclose and even if it does, that foreclosure must be the last resort step. However, some Federal action to impose at least a 90 day moratorium on foreclosures nation wide would help in making sure that more fraudulent foreclosures take place and that more borrowers have the time to try and save their homes.

Walking Away To Better Times

Much ado has been made about “walking away” from your mortgage by the financial services industry and the government. They say that it is wrong, that you signed a contract when you bought your home and you should honor it. They promise dire consequences ahead for you if you just walk away and hand your lender the keys to your home.

Homeowners walking away from their homes certainly is a problem for the banks: it causes them to have to face some serious losses and is a gigantic reality check. Banks don’t like reality checks much…they love playing with their funny money.

(more…)

Major Federal Court Ruling: Borrowers Are Third Party Beneficiaries Under HAMP

gavel

 

As you know, one of the major hurdles for HAMP has been the lack of enforceability on the borrower’s side. I have said on this very blog many times that HAMP, well-intentioned as it may be, had no teeth.

Well, in a recent ruling, a Southern California Federal Court Judge, M. James Lorenz, may have just given HAMP some badly needed dentures.  The ruling was made on behalf of the plaintiff, Ademar Marques, who sued Wells Fargo for breach of contract under HAMP. There have been and are a number of lawsuits alleging the same thing and the big question has been, how will the courts rule. Now we have an answer from at least one Federal Court.

The judge ruled that borrowers are intended third party beneficiaries to the contract made between the servicers and the Federal government when the servicers agree to participate in HAMP.  What this means is that, according to this ruling, borrowers do have standing to sue for breach of contract under HAMP. 

While there is no guarantee that other judges will rule similarly, it does establish precedent in case law for other judges to follow. It certainly means that cases in California, one of the states hardest hit by the foreclosure crisis, that there is hope for homeowners struggling to get their loans modified.

Blaming Fannie & Freddie: Taking The Easy Way Out

“Will Obama Slay The Fannie and Freddie Beast?”  is the headline of one story appearing in Newsweek today. Basically, it appears that instead of doing anything to the major players that actually caused the economy to collapse, you know, those fat cat Wall Street CEOs with their stupid, blow-up-the-housing market schemes, once again the easy target gets the blame: poor people who shouldn’t have been able to buy homes in the first place.

The Obama administration appears to be suggesting — very subtly — that homeownership isn’t a God-given right. That the American dream has morphed into an American entitlement. That millions of people who should not have been homeowners in the first place ended up paralyzed by unsustainable debt as a result

The American Dream is indeed powerful and one of its major tenets is owning your own home. Why is that such a tenet, though? Because for years, owning a home was the only asset any except the top five percent of Americans could claim.  Having said that, homeownership has never been an entitlement and the idea that giving poorer Americans the ability to purchase homes led to this crisis is completely incorrect. It is par for the course, however, as it is easy to blame everything on those least able to represent themselves. Poor and working class Americans  don’t have a powerful lobby like Wall Street does.

The fact is that the financial crisis was NOT caused by making loans to poor people to buy homes. It was NOT caused by the CRA or Fannie and Freddie. It was caused by greedy Wall Street bankers knowingly creating financial products that were doomed to fail from the very beginning.  The Center For Responsible Lending and others have done studies which have  revealed that risky borrowers weren’t the problem;  it was the terms of the loans themselves .  In fact, the majority of people who received “subprime” loans could have qualified for conventional mortgages, with a much lower default risk.  Furthermore, most of the loans made were not loans to first time homebuyers: the majority were refinances and loans made to homeowners moving from one house to another.  

It is deeply saddening to me that the Obama Administration appears to be buying into the Republican talking points, given to them straight from Wall Street, that the cause of the crisis was government intervention to try and help people get a leg up when true cause was the absence  of government in making sure that the mortgage products that were being peddled to the American people were safe and sustainable.

More Lawsuits Filed Against Lenders For Breach of Contract Under HAMP: Don’t Mess With Texas

It looks like more and more lawsuits are popping across the country from angry homeowners regarding the failures of bank servicers to properly handle loan modifications under HAMP. I’ve written about the suit filed in Massachusetts here.

The latest lawsuit was filed in the state of Texas by The Texas Housing Justice League and 15 homeowners against Bank of America and its subsidiary, BAC Home Loan Servicing LP.  This lawsuit, like the others, alleges, in part,  that the HAMP trial modification agreement is a contract which Bank of America and BAC violated by not timely modifying the loans once the plaintiffs had performed their parts under the loan modification agreement.  In some cases, the plaintiffs’ homes were foreclosed upon even while they were in an active trial modification and making payments.

The complaint lists a litany of grievances common to most homeowners who have attempted to get their loans modified: lost paperwork, servicer demands for same information numerous times, inconsistent information given by bank employees, and a difficulty in reaching someone in charge to get answers.

Like the other lawsuits, most important points of contention that the courts will have to decide are as follows:

1: Does the agreement between non-GSE servicers and the Treasury  to participate in HAMP constitute a legal and binding contract? If so, then the servicers are legally obligated to follow each and every program guideline, including but not limited to not foreclosing on properties that are in active HAMP trials. 

Granted, even if the courts decide that the HAMP participation agreement is a legally binding contract, the Treasury, and not the homeowners would have to sue for non-performance. 

2: Does the HAMP trial modification agreement between the servicer and the homeowner constitute a legal and binding contract? If so, then the servicer has a duty to the homeowner to perform its part of the contract, that is to modify the loan, so long as the homeowner has completed his or her part, that is made the payments and sent in the requested documentation.

How the court rules on the second question is more important for homeowners seeking modifications. Favorable rulings will invite more lawsuits from other states, and could possibly move the courts to act similarly in other jurisdictions.

Strategic Default Is Only Ok If You’re Rich

Visit msnbc.com for breaking news, world news, and news about the economy

 

A recent article in the New York Times discussed how the rich are defaulting on their mortgage loans at an increased rate as compared to the rest of the population.  From the article:

More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

In fact, the delinquency rate on investment homes with mortgages of a million dollars is more than double the rate of homes where the mortgage was less. For the million dollar homes, the rate is 23% as opposed to 10% for less expensive properties.

Yet, Fannie Mae and Freddie Mac, the largest lenders of residential mortgage loans under $500,000, are stepping up the rhetoric against strategic defaulters and taking steps to penalize them. 

Since Fannie Mae and Freddie Mac cannot take loans of greater than $729k, the result is quite obvious: to penalize the working and middle class for making the same smart money moves that rich people do and take for granted all the time.

Recently, the Republicans added an amendment to a bill that would forbid strategic defaulters from getting FHA financed loans, ever. Who gets FHA loans? Not the rich…these are solidly middle and working class financial instruments. 

Despite all of the moralizing about “keeping your word…you signed on the dotted line that you would pay…” and “foreclosures damage the community,” the real motivator for lenders here is fending off damage to the bottom line.  Let’s be clear:  if a high percentage of mortgage holders with loans under $500K were to default, this would really damage the financial health of the  banks.  It has nothing to do with morality or a sense of community and everything to do with profit. If these banks gave a fig about community or morality, they never would have created the incredible mortgage casino that brought us to this point.

Buy VerizonCell Phones and Save. | Thanks to Bank Rates & Reviews, CD Rates and UK Loan
Easy AdSense by Unreal